Are you working with borrowers who have substantial assets but face challenges with traditional income verification?
Asset-based lending offers a smart solution, allowing them to invest in real estate or purchase a new home without the usual income documentation hurdles.
What is Asset-Based Lending?
Asset-based lending is an alternative financing option where a borrower can use their assets to showcase their financial health and secure a mortgage. This approach is especially beneficial for retirees, self-employed workers, or those with fluctuating incomes who may not meet traditional loan criteria.
What is Considered an Asset?
Assets that can be considered include:
- Bank Accounts: Checking and savings accounts can be fully utilized.
- Investment Accounts: Stocks, bonds, mutual funds, and retirement accounts are eligible.
- Certificates of Deposit (CDs) and Money Market Accounts: These can also be leveraged as part of the asset pool.
How Does Asset-Based Lending Work?
- Personal Balance Sheet Evaluation: Lenders conduct a comprehensive assessment of the borrower’s liquid assets to establish a clear picture of their financial standing. This includes evaluating bank accounts, investment portfolios, and other eligible assets.
- Hypothetical Income Calculation: Instead of relying on conventional income documentation like W-2s or tax returns, a hypothetical monthly income is derived from the asset base. This calculated ‘income’ is then used to determine the borrower’s loan-to-value (LTV) and debt-to-income (DTI) ratios, similar to traditional loan assessments.
- Loan Terms: Based on the asset evaluation, lenders set the loan amount, interest rates, and repayment schedule. This approach can often result in more favorable terms compared to traditional lending methods.
About LendSure’s Asset Qualifier/Asset Depletion Program
LendSure offers a standout Asset Depletion/Asset Qualifier loan program tailored to meet the unique needs of borrowers.
We credit borrowers with 100% of their cash and cash equivalents, 80% of their stocks and bonds, and 70% of their retirement accounts. Our underwriting process allows for a higher qualifying monthly income by dividing the total assets by 60, effectively doubling the qualifying income compared to standard programs that use a 120-month division.
Here’s an example of our calculation for a semi-retired borrower.
| Asset Type | Amount | Percentage Used | Qualifying Amount |
| Cash Equivalents | $525,000 | 100% | $525,000 |
| Stocks & Bonds | $250,000 | 80% | $200,000 |
| Retirement Accounts | $450,000 | 70% | $315,000 |
The total qualifying assets here add up to $1,040,000. After dividing that by 60 months, you get a $17,000 monthly income allowance. See a similar loan scenario play out here.
Why Add LendSure’s Program to Your Loan Toolkit
By offering LendSure’s Asset Qualifier/Asset Depletion loan program, you can:
- Expand your client base
- Provide more flexible client-focused solutions
- Stand out in the market
- Boost client satisfaction, foster long-term relationships and win referrals
The LendSure Way
It’s simple. We make loans that make sense. We’re not in-the-box lenders. Of course, there are numbers ratios, and data to consider, but we know that behind every file, there’s an individual with a unique circumstance seeking a loan. We work hard to offer our common-sense take on lending to borrowers seeking funding for the home of their dreams, another addition to their investment property portfolio, or refinancing of a currently-owned property.
Are you ready to benefit from a common-sense approach to lending? Contact us today to learn more about non-QM loans and how partnering with LendSure Mortgage Corp. can help grow your bottom line. Did you like our guide to Asset-based lending? Check out another blog on the subject.
